Guam Tax Squabble May Lead to Federal Charges

(CN) – A Guam senator has pushed for prosecution of the territory’s Department of Administration, which faces a federal class action that claims it mismanaged millions of dollars in income tax refunds. Sen. Vicente “Ben” Pangelian has sent his fellow senators and the Guan attorney general three letters to date since the filing of an April 2011 citizens complaint alleging that the government of Guam failed to deposit into trust five years’ worth of taxpayer refunds. Lead plaintiffs Rea Mializa Paeste, Jeffrey Paeste and Sharon Zapanta say they never received their income tax refunds “since at least tax year 2008 to the present.” “Defendant has not paid plaintiff[s] the income tax refunds corresponding to those returns and claims, according to the complaint. “By the government’s own admissions, according to media reports, the government of Guam owes taxpayers millions of dollars in income tax refunds,” the class says. “According to the Guam Dept. of Revenue & Taxation, the Govt. of Guam will owe taxpayers about $269 million in refunds by the time the tax filing season ends in April 2011, representing refunds owed to thousands of taxpayers,” the complaint also states. Pangelian wants the government to take action. In a June 8 letter to Guam Attorney General Leonardo Rapadas, the senator asked for the department’s compliance with Guam’s Income Tax Refund Efficient Payment Trust Fund law. “Recently the governor of Guam has announced that there is approximately $33 million available to for income tax refunds that he agrees to pay out for tax year 2011,” Pangelian wrote. “Based on the analysis by the Office of Finance and Budget, there should be approximately $10 million more that should have been deposited into the Income Tax Refund Efficient Payment Trust.” Pangelian claims that a December audit by the Office of Public Accountability found that the Department of Administration did not deposit approximately $41 million into the trust fund between October 2010 and September 2011. “It is apparent the Tax Refund Law is not being completely adhered to by DOA, despite actual revenue collections being within 2% of estimated revenues,” Pangelian wrote. The senator released another statement on June 13. “I am reminding the attorney general that his first duty is to protect the rights of citizens who elected him,” he said. “Clearly, when refunds are withheld from taxpayers who are owed refunds because someone is not following the law, he must defend their rights and not those denying the people their rights.” Pacific News Center reported that the attorney general would not comment on the pending litigation. U.S. District Judge Frances Tydingco-Gatewood recused herself from the federal lawsuit in November because her son is expecting a tax refund. U.S. District Judge Consuelo Marshall now presides over the case. Guam Territorial Income Tax, or GTIT, is paid to Guam’s government, rather than the U.S. government. The 1950 Organic Act of Guam established the framework to “mirror” federal tax laws for the island. The complaint states: “Upon opportunity for further discovery, it may be revealed that the government of Guam has not paid income tax refunds for periods preceding 2006.” The class seeks declaratory judgment and restitution. It is represented by Ignacio Aguigui of Lujan, Aguigui & Perez in Hagatna, Guam, and Daniel Girard and David Stein of Girard Gibbs in San Francisco.